With rising tuition costs, more and more people are finding it difficult to afford an education, especially for those in the low and middle class. Every year, the number of people who skip college is increasing. Those who don’t get scholarships and attend private school are ending up with a 10-30 year student loan payment term that rivals a mortgage payment.
Luckily, each state offers a 529 triple-tax advantaged education savings account. The money you contribute to a 529 is tax deductible on your state income tax return. 529’s offer tax deferred growth and allow you to withdraw your money tax free, at any time, as long as you spend the money on qualified educational expenses.
Qualified educational expenses include college tuition, private school for children at least 5 years old, text books, computers, and even on-campus housing. Each state’s 529 account differs from each other. In PA, you can contribute up to $15,000 per year, or $30,000 for married couples who both make at least $15,000 per year. Pennsylvania’s total maximum contribution is $511,758, at which you can longer deposit money, but you can keep your money growing in the account.
There are typically two types of 529 accounts offered by each state. One is a 529 Guaranteed Education Savings Plan, which aims to keep up with rising tuition costs, and then there is the high risk high reward 529 Investment Plan that allows you to select several options from The Vanguard Group as well as age-based investing plans. No matter what state you choose, you can use your 529 to pay for educational expenses in any state.
What’s more, many 529 accounts offer a gift code or link allowing friends and family to send money directly to your children’s 529 account. You can even use the account yourself if you want to go back to school to earn your master’s degree or graduate certificate. 529 accounts are a smart way to save and pay for education costs. I highly recommend that you check out your state’s 529 plan.
